Federal Reserve orders Silvergate to liquidate in a limited time! A retrospective of the crypto-friendly bank Silvergate

The Federal Reserve Board has ordered the crypto-friendly bank Silvergate to submit a liquidation plan within 10 days to streamline the bank's operations. This bank, which rose with the cryptocurrency industry, is now officially making its way into history due to the same industry. Let's take a look back at the life of Silvergate Bank!

Silvergate Bank Rises Rapidly with the Cryptocurrency Industry

Silvergate Bank is a licensed bank in California that has been serving digital asset users since its inception in the cryptocurrency industry in 2013. FTX, Gemini, and Coinbase are among its clients. With a unique niche market, it quickly rose in the industry over the past decade, transitioning from a regional bank to a publicly listed company.

As the deposit bank for FTX and Alameda Research, Silvergate handles related transfer transactions. Following the collapse of FTX, it faced significant scrutiny from Congress for alleged improper procedures, with some even suggesting collusion with FTX. This investigation is ongoing.

After FTX's bankruptcy, amidst the panic and run on the entire cryptocurrency industry, Silvergate, with deposits highly concentrated in digital asset users, experienced a significant run on its funds. Within three months, two-thirds of total deposits, amounting to a staggering $8.1 billion, were withdrawn.

In the fourth quarter of last year, Silvergate sold $5.2 billion in bonds to secure cash flow, resulting in a $718 million loss. Subsequently, its stock price fell below the offering price and never recovered.

Unable to Submit Financial Reports in Early March, Silvergate Decides to Liquidate Banking Operations Voluntarily

After experiencing significant deposit outflows, shorting of its stock, and abandonment by its cryptocurrency partners, Silvergate finally admitted its inability to submit financial reports. Following applicable regulatory procedures, it decided to voluntarily liquidate the bank in an orderly manner.

In the following two months, another cryptocurrency-friendly bank, Signature Bank, along with Silicon Valley Bank, Silicon Valley's startup bank SVB, and regional bank First Republic Bank, were also taken over by the FDIC due to deposit run issues, marking the most severe financial crisis in the United States since the 2008 financial crisis.

Unlike the other banks, Silvergate did not accept FDIC's intervention but opted to wind down its banking operations in its own way. Its liquidation plan includes full repayment of all deposits, evaluating ways to settle claims, and retaining the residual value of its assets, including proprietary technology and tax assets.

Now, the Federal Reserve Board has officially issued an order requiring Silvergate to submit a liquidation plan within 10 days to streamline the bank's operations. This bank that rose with the cryptocurrency industry ultimately exits the stage due to the same industry, a poignant end.

For more analysis and retrospectives on Silvergate Bank, please see:

Crypto-Friendly Bank in Trouble: Can Silvergate Survive a $900 Million Loss?

Abandoned by Crypto Partners, What's Left for Crypto-Friendly Bank Silvergate?

Fire at Fiat Reserve Sparks Concerns: How Does Silvergate's Bad Debt Differ from Traditional Banks?